The Week Ahead 2nd – 6th October: OPEC faces tough choices on oil production, while RBA monitors inflations surge
<p>Welcome to Key to Markets preview of the Week Ahead</p>
<h2>Currency Pair Performance</h2>
<p>5-day performance as of <strong>September 28, 2023. 10:30 GMT</strong></p>
<p><img decoding="async" fetchpriority="high" class="alignnone wp-image-26016 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/currencypair.png" alt="" width="623" height="289" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/currencypair.png 623w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/currencypair-300×139.png 300w" sizes="(max-width: 623px) 100vw, 623px" /></p>
<p>Source: finviz.com</p>
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<h2>10 Big Stories Last Week</h2>
<p>In case you missed it…</p>
<p><strong>US 10-year treasury yield hit a 16-year high.</strong> The resilient US economy and rising oil prices keep inflation expectations elevated and fuel bets that the Fed will keep rates higher for longer.</p>
<p><strong>Oil hit a 10-month high.</strong> A deeper-than-expected drawdown in US stockpiles added to evidence of tight supply, sending WTI to almost $94 a barrel.</p>
<p><strong>DAX fell to a 6-month low.</strong> The German index dropped after German consumer confidence and IFO business sentiment declined, raising concerns over a prolonged economic slowdown.</p>
<p><strong>USD/JPY approaches 150.00.</strong> The pair rose above 149.00 on BoJ-Fed divergence after the BoJ minutes raised doubts over how soon the BoJ will end negative rates.</p>
<p><strong>Meta released Quest 3.</strong> The upgraded headset is $200 more expensive at $500 and pivots away from VR to mixed reality, meaning that it could be used for longer.</p>
<p><strong>Tesla fell on EU probe concerns.</strong> The EV maker will reportedly be part of the EU probe into China-made EV imports and the subsidies that those companies receive.</p>
<p><strong>GBP/USD fell to a 6-month low.</strong> Money markets are no longer pricing in another interest rate hike from the BoE as the economic outlook deteriorates.</p>
<p><strong>China’s Evergrande shares are suspended.</strong> The real estate group was not able to reissue debt owing to an investigation by Chinese authorities into its mainland unit.</p>
<p><strong>Micron Technology fell after earnings.</strong> The chip maker beat estimates on both the top and bottom lines. However, MU painted a mixed picture for the current quarter.</p>
<p><strong>The US moved closer to a Federal government shutdown.</strong> US budget controversy threatened to shut the US government down for the 14th time since 1981.</p>
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<h2>Chart of the Week</h2>
<p><img decoding="async" class="alignnone wp-image-26019 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/chartoftheweek.png" alt="" width="618" height="329" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/chartoftheweek.png 618w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/chartoftheweek-300×160.png 300w" sizes="(max-width: 618px) 100vw, 618px" /></p>
<p>The yield on the 10-year treasury has risen to its highest level in 16 years after September has proved to be a very dark month for bonds.</p>
<p>The 10-year yield has witnessed three jumps across the month, highlighted in the chart, caused by the non-farm payroll data at the start of the month, the FOMC meeting last week, and the jump in oil prices this week.</p>
<p>The market is realising that it is not the speed of rate hikes or the peak level that matters so much but just how long the Fed intends to keep rates elevated. Fed fund futures have slashed predictions for rate cuts next year.</p>
<p>This is a headwind for stocks but is most clearly being played out in the FX market, where the USD has rallied for 10 straight weeks, USD/JPY is on the brink of 150.00, and USD/CHF hit a 6-month high.</p>
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<h2>5 Things to Watch This Week</h2>
<p><strong>1. OPEC meeting</strong><br />
The OPEC meeting will take place in person on the 4th of October. The meeting comes as oil prices have rallied over 30% since the beginning of June, bringing oil close to $100 per barrel. Much of the gains have been attributed to Saudi Arabia and Russia’s additional oil production cuts, which were then extended to the end of the year. Given the expected oil supply deficit in the fourth quarter, it is unlikely that the group will cut supply again at this meeting.</p>
<p><strong>2. RBA rate decision</strong><br />
The RBA we’ll meet on Tuesday, the 3rd of October, as inflation is back on the rise. Australian monthly inflation rose to 5.2%, up from 4.9% in July, meaning that it’s not safe to conclude that the RBA rate cycle has ended. However, the RBA may be looking to wait to see Q3 CPI data, which is published at the end of October, before making a decision over whether to hike interest rates again this year or not.</p>
<p><strong>3. US non-farm payrolls</strong><br />
The August nonfarm payrolls came in higher than expected, but the unemployment rate unexpectedly ticked higher, and wages were marginally softer, giving the Federal Reserve room to pause interest rate hikes. The Fed and the market alike will be looking for confirmation that the US labour market is continuing to cool rather than adding inflationary pressure. Expectations are for job creation to slow to 150k but for average wage growth to rise 0.3% MoM and unemployment to slip to 3.7%. A stronger-than-expected nonfarm payroll report could boost hawkish Fed bets, lifting the US dollar and pulling stocks lower.</p>
<p><strong>4. Eurozone retail sale</strong>s<br />
Eurozone retail sales will be released on Wednesday 4th, October and come amid rising concerns over the health of the eurozone economy. Sales fell 1%MoM in August as households contended with inflation that was still over twice the ECB’s target level and rising interest rates. Concerns are rising that the eurozone contracted in the current quarter and could face a recession in the second half of the year.</p>
<p><strong>5. China Caixin services & manufacturing PMI</strong><br />
Recent data from China has been showing signs of improving, suggesting that the world’s second-largest economy could be starting to turn a corner after months of sluggish growth. The manufacturing PMI is expected to rise to 51.4 in September, up from 51 in August, the fastest pace of expansion since February. The services sector PMI was 51.8 in August, and the markets will be keen for the expansionary trend to continue.</p>
<h2>Economic Calendar Highlights</h2>
<p><img decoding="async" class="alignnone wp-image-26022 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/economiccalendar.png" alt="" width="683" height="515" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/economiccalendar.png 683w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/economiccalendar-300×226.png 300w" sizes="(max-width: 683px) 100vw, 683px" /></p>
<p>Source: FXStreet.com</p>
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<h2>Technical Analysis:</h2>
<p>TA of the major asset classes (Forex – Commodities – Indices…).</p>
<p><strong>EUR/USD (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26025 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/EURUSD.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/EURUSD.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/EURUSD-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/EURUSD-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/EURUSD-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/EURUSD-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/EURUSD-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>EUR/USD is in a downtrend, making lower highs and lows below the 50 SMA. RSI is in a bearish position and is oversold. Price returned to 1.05 and the March 2023 lows, our base case from last week. This is major support, which could mean a near term rebound.</p>
<p><strong>GBP/USD (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26028 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/GBPUSD.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/GBPUSD.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/GBPUSD-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/GBPUSD-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/GBPUSD-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/GBPUSD-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/GBPUSD-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>GBP/USD is in a downtrend, forming lower lows and lower highs beneath the 50 SMA. RSI has rebounded from being heavily oversold below 20. A rebound seems likely, perhaps toward resistance at 1.23 then 1.243 but the trend remains firmly down.</p>
<p><strong>USD/JPY (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26031 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/USDDJPY.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/USDDJPY.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/USDDJPY-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/USDDJPY-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/USDDJPY-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/USDDJPY-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/USDDJPY-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>USD/JPY is in an uptrend making higher highs and lows above the 50 SMA. RSI is just about back over the 65 level. The price is moving towards a test of the big 150.0 level, meaning a correction could be near, otherwise 152 is next resistance.</p>
<p><strong>Gold (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26034 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XAUUSD.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XAUUSD.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XAUUSD-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XAUUSD-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XAUUSD-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XAUUSD-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XAUUSD-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>XAU/USD is in a downtrend, making lower lows and highs below the 50 SMA. RSI is back in oversold territory. Price followed through on the long-legged doji we reference last week and has taken out 1900 and the range low at 1890. More downside seemly likely unless there is a quick close back over 1890.</p>
<p><strong>Brent Oil (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26037 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XBRENT.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XBRENT.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XBRENT-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XBRENT-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XBRENT-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XBRENT-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XBRENT-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>XBRENT is in an uptrend, making higher highs and lows above the 50 SMA. RSI is in overbought territory, forming a possible H&S top. Price is testing the prior high at 95 and 100 is the logical target bigger picture. A move under 90 would be needed to turn short term bearish.</p>
<p><strong>US500 (Daily Candlestick Chart)</strong></p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-26040 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XUS.png" alt="" width="2556" height="1227" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XUS.png 2556w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XUS-300×144.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XUS-1024×492.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XUS-768×369.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XUS-1536×737.png 1536w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/09/XUS-2048×983.png 2048w" sizes="(max-width: 2556px) 100vw, 2556px" /></p>
<p>XUS500 is in a downtrend, making lower lows and highs under the 50 SMA. RSI is oversold under 35. Price has formed a hammer reversal pattern from the 4250 level, signifying a possible near term rebound, and possible end of the bigger correction from 4600.</p>
<p>Thank you very much for reading – and have a great week trading!</p>
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<p>The post <a rel="nofollow" href="https://www.keytomarkets.com/blog/analysis/the-week-ahead-2nd-6th-october-opec-faces-tough-choices-on-oil-production-while-rba-monitors-inflations-surge-26015/">The Week Ahead 2nd – 6th October: OPEC faces tough choices on oil production, while RBA monitors inflations surge</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>
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